The financial fate of car dealers frequently reflects what's going on with their factories during good times and bad.
Right now for example, a lot of Ford, Lincoln-Mercury and Chevy dealers in the United States are finding it tough to make a buck, while most Toyota dealers are having another pretty darned good year.
During the National Automobile Dealers Association convention in Orlando, it was disclosed that dealers' profits in the United States are at a five-year low. Things are so bad that about 25 percent of all dealerships are losing money.
Thinner margins were among the most common gripes during the make meetings at NADA. Sometimes the thin margins are because new-vehicle sales are lousy, and sometimes it's because an automaker has changed its pricing structure and reduced the difference between the wholesale price the dealer pays and the sticker price.
When that happens, margins get smaller, and even dealers selling the most successful, upscale brands can get squeezed, whether in North America or Europe.
In Germany, for example, franchised BMW dealers are going bankrupt while the factory rings up record profits. Last year six BMW dealerships declared themselves insolvent, and 22 others just went away.
The reason for the problem in Germany is simple, according to Automobilwoche, a German-language publication that, like Automotive News, is published by Crain Communications Inc. Stores owned by the factory are competing aggressively with the independent dealerships. That destroys the profit margin.
You see, even in the car business, it's tough to beat the house.
You may e-mail Edward Lapham at [email protected]